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Construction & Design

New law makes it easier for contractors to sue Schools Construction Authority

New York’s Governor Andrew Cuomo has signed a law making it easier for contractors to file claims against the New York City School Construction Authority (SCA).

The School Construction Authority Reform Bill closes a loophole that has allowed the SCA to avoid lawsuits from contractors over payment disputes.

Until now, contractors were only able to sue the SCA within three months of submitting a Notice of Claim – for example over unforeseen delays or expenses. However, the SCA has usually taken more than three months to accept or deny such claims. This has meant that when contractors knew they wanted to sue over a rejected claim, it was often too late to do so.

The new bill allows contractors to sue the SCA within three months of having a notice rejected.

HENRY GOLDBERG
HENRY GOLDBERG

The bill was initially conceived and long-championed by law firm Goldberg & Connolly’s managing partner, Henry L. Goldberg.

The new law will dramatically improve the change order process for subcontractors working with the New York City School Construction Authority (SCA). The law takes effect immediately with regard to all SCA contracts executed on or after December 17, 2014.

Prior to this amendment, under Public Authorities Law §1744, a contractor was precluded from bringing any lawsuit against the SCA unless: (1) it had submitted a detailed, written, verified Notice of Claim upon which such action is based to the SCA within three months after the accrual of such claim; and (2) a lawsuit was commenced within one year after the happening of the event upon which the claim was based.

However, contractors often did not know that there was a dispute until long after the time to submit a verified Notice of Claim under §1744 had passed. Historically, an accrual of claim against the SCA arose when a contractor’s damages are ascertainable.

The SCA could argue, therefore, that a contractor’s claim for extra work accrues when it first submits its change order proposal.At that point, damages appear to be known, since the proposal itself values the work.

However, a contractor would not know of a dispute until the SCA actually denied the change order proposal, or offered an amount that could not reasonably be accepted. Given the backlog of unresolved change orders, this process typically took much longer than the statutorily required three months in which a claimant must submit a verified Notice of Claim under §1744.

The industry achieved a major victory by having the Public Authorities Law §1744 amended to replace the words “accrual of a claim” with “denial of a claim.”

The time to file claims against the SCA should, and now will, run from a denial of a claim arising under any SCA contract.

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